Entrepreneurship 101: The Malefic Strangers And Their Evil Net


 Release Date: March 21, 2001
© 2001 Macroknow Inc. All Rights Reserved.


Truth.—Nobody dies nowadays from fatal truths: there are too many antidotes. Nietzsche, Human, All Too Human (I).*


The Metaphysics of Failure

A business in your neighborhood fails. What and whom do you blame? Some blame poor management, poor products, poor marketing, or poor customer service. Others blame the entrepreneur’s recklessness, ignorance, greed, or undercapitalization. Still others blame the predatory dog-eat-dog character of the competitive marketplace – corporations devouring one another, especially during economic downturns.

The truth is that every company ultimately dies. Why? The metaphysics of failure is simple: Everything that issues from the perishable is perishable; and everything that has a beginning has an end.1 This is the incontrovertible fate of all human enterprise. According to this logic, of Gnostic origin, not even the greatest companies can be spared.

The entrepreneur is an optimist. He must be, if he wants to create wealth. To succeed he must know how to compete, grow his business, and survive. His dream weaves liberty, independence, adventure, conquest, and riches. His intention is always clear: The capitalist rose must bloom.

Unfortunately, the entrepreneur seldom reflects upon the dark side of business life -- the tribulations and ultimate death of his enterprise. Why should he? For answers, I consulted the philosophical-religious sources. These offer the deepest insights into money matters.

Deep Insights into Money Matters

All religious texts offer deep insight into money matters.

For example, The Gospel of Thomas mentions this strange saying attributed to Jesus: "There was a rich man who had much money. He said, ‘I shall put my money to use so that I may sow, reap, plant, and fill my storehouse with produce, with the result that I shall lack nothing.’ Such were his intentions, but that same night he died. Let him who has ears hear." 2

Ecclesiastes, a book of the Old Testament, sheds light on the connection between profit and vanity:

"The race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill"3 [my emphasis].

"Then I looked on all the works that my hands had brought, and on the labour that I had laboured to do: and, behold, all was vanity and vexation of spirit, and there was no profit under the sun . . . Therefore I went about to cause my heart to despair of all the labour which I took under the sun"4 [my emphasis].

"There is an evil which I have seen under the sun, and it is common among men: A man to whom God hath given riches, wealth, and honour, so that he wanteth nothing for his soul of all that he desireth, yet God giveth him not power to eat thereof, but a stranger eateth it: this is vanity, and it is an evil disease"5 [my emphasis].

Apparently, strength, money, swiftness, understanding, knowledge, and skills guarantee nothing. The entrepreneur plans, organizes, works hard, but his success is never certain. Why? Because the Deity forbids it! The entrepreneur’s search for freedom is nothing but wicked entanglements in the evil net of the marketplace.

The irony is tragic. The entrepreneur struggles to free himself from debt and bondage, only to discover that "strangers" are devouring his labor, wealth, and honor.

The "Strangers"

But who are these "strangers"? I will unconceal their identity for you, but first, allow me a detour.

In Ethics, Aristotle wrote: "[T]hose who follow illiberal occupations, like . . . moneylenders who make small loans at a high rate of interest; for all these receive more than is right, and not from the right source. Their common characteristic is obviously their sordid avarice . . ."6 [my emphasis].

In The Wealth of Nations, Adam Smith wrote that landlords "like all other men, love to reap where they never sowed"7; that industry benefits the rich and powerful8; that merchants and manufacturers extort legislation in support of "their own absurd and oppressive monopolies."9 "When the law does not enforce the performance of contracts, it puts all borrowers nearly upon the same footing with bankrupts or people of doubtful credit . . . The uncertainty of recovering his money makes the lender exact the same usurious interest which is usually required from bankrupts."10

Joseph Schumpeter was a minister of finance in Austria and a Harvard professor. In Capitalism, Socialism and Democracy, he wrote: "The perfectly bureaucratized giant industrial unit not only ousts the small or medium-sized firm and 'expropriates' its owners, but in the end it also ousts the entrepreneur . . . "11 [my emphasis].

The "strangers" are thus usurious, avaricious, oppressive beings. They masquerade as meritorious moneylenders, merchants, manufacturers, landlords, bureaucrats. They may be strangers to you, if you are a new entrepreneur or a new investor, but not to the marketplace -- or to mammon, its deity.

The Boom/Bust Cycle – What is Hidden from the Masses

During recessions, moneylenders can destabilize small and midsized firms with ease.

As I discussed in my earlier works12, the chain of causality of the boom/bust cycle is simple – unfortunetaly, its motivation is cleverly concealed from the masses.

There are many species of boom/bust cycles. I will focus here on two: the first drives the economy or an economic sector, the other the stock market. The stock market cycle is usually nested in the economic cycle. All boom/bust cycles have four phases with the following essential characteristics:

  1. Economic expansion. Banks create new bank-money in the form of new debt. Entrepreneurs and speculators borrow the fictive money. Entrepreneurs use it to invest in new facilities and equipment, and to employ people. Speculating cognoscenti and slyboots use it to prime the stock market. The economy grows.

  2. Wealth creation. Entrepreneurs use their assets and employees to create new products and services -- and new wealth. Speculators pump money in certain segments of the economy and in the stock market. The focus of their speculation has included sovereign loans, leveraged buyouts, real estate, mutual funds, and, more recently, high-tech. The media talks up the expansion and is rewarded with advertising budgets. The hype works: Herds of first time investors join the speculators, first slowly, then in a frenzy of greed. People pump billions of dollars into stocks. Market values accelerate upward. The unsuspecting herds fantasize about wealth and early retirement. Meanwhile, the cognoscenti activate stealthy plans to bail out from the market with monstrous capital gains. The bail out initiates a deceleration in stock market values. Stock values then plummet. The herds panic. But not the cognoscenti and their bankers. They are too busy switching their focus to the entrepreneurs’ newly created wealth.

  3. Destruction. The destruction phase of the business cycle begins with clockwork precision. Banks stop creating bank-money – they freeze, reduce, or cut the credit lines of illiquid businesses. Starved for credit, thousands of firms are destabilized. Non-accrual loans soar. Thousands of companies file for bankruptcy. A recession develops. Layoffs multiply. Unemployment soars. The average family income decreases. Asset values plummet. The property crime rate soars. Government debts increase.

  4. Harvesting and predation. Banks and their agents seize or take control of the newly created wealth from the defaulting debtors. Vultures coerce then cannibalize failed firms. There is nothing creative in this process. The citizen’s debt load deteriorates out of control. Millions of consumers cannot meet their debt obligations and file for bankruptcy. The number of foreclosures and evictions increases. Asset seizures multiply. Stressed to the limit, family bonds break. The number of abortions increases. The number of "heart attacks" increases. The number of suicides increases. The number of homeless increases. Governments indulge in counter cyclical activities. They cut taxes -- and, simultaneously, tighten bankruptcy laws. The gap between the propertyless and the wealthy swells. The cognoscenti and their bankers digest the new wealth and hoard their monstrous profits. Then the cycle is repeated again.

The repetition of the boom/bust cycle is nothing but the metaphysical "eternal return of the same" in Capitalism.

The high priests of speculation and their moneylenders have manufactured booms and busts for millennia. Their overinvestments still plague many countries. The calamities from the last overinvestments in commercial real estate will be supplanted with new ones from overinvestments in dot-coms.

The buzz about the "new economy" and high-tech is a deception. Progress occurs not because of capitalists and their moneylenders, but despite the avaricious among them. During recessions, small technology-rich firms become especially vulnerable to creditors. Driven by greed, unscrupulous creditors conjure up plans to destabilize and entangle business owners in order to appropriate their assets – at a fraction of their value. All properties -- real, tangible and intangible (intellectual property, trade secrets, trade marks, patents, copyrights, and R&D tax credits) -- become targets of greed.

The Lesson for the Entrepreneur

The entrepreneur must guard against two potential threats: "bank-induced risks"13 and "creative destruction."14

The clearest empirical evidence of bank-induced risks comes from Japan.

Suspension of credit accounted for 91.6% of all business failures in Japan during the period between 1980 and 1990.15 More distressing, Japanese statistics for 1979 indicates that 23% of the liquidations involved yakuza (gangsters).16

The most damning evidence of creative destruction comes from the United States and Canada. According to Schumpeter, the duration of the business cycle is about 9.5 years.17 Bankruptcy statistics for the most recent 10-year period for which we have data reveals the extent of the economic and psychic damage.

During the period from 1988 through 1997, the U.S. suffered 737,548 business failures.18 The number of U.S. non-business bankruptcy filings was 8,600,376.19 Canada, for the same period, registered 117,508 business bankruptcies and 559,955 consumer bankruptcies.20 North America has become an economic war zone.

The historicity of the boom/bust cycle is always the same. The first-time entrepreneur cannot see around his corner.21 So sly "strangers" hide their traps accordingly -- around his corner. The assault on the entrepreneur's interests comes as a startling bolt-from-the-blue strike. And the perpetrators cover up their plunder with denial, denial, and more denial.

The lesson for the entrepreneur is clear: Before you write a business plan, before you raise capital, before you borrow, before you budget a single dollar, find all you can about the "strangers" – and how they can misappropriate, devour, or destroy what you want to create.

Caveat emptor is not enough. Replace it with Nietzsche’s admonition: "The market-place is full of solemn buffoons . . . They want blood from you in all innocence, their bloodless souls thirst for blood . . . Flee my friend . . ."22

The Laws of the Marketplace vs. The Laws of Physics

The laws of the marketplace are not like the laws of physics. For example, Hegel’s two states of being, being-for-self and being-for-another23 have no analogs in physics.

In physics, electrons cannot dominate other electrons, deceive them, reduce them to servitude, or sell them. There is no vanity, lust, avarice, greed, or malice in physics. Physics deals with degrees of freedom, not with free will (at least not yet).

In the marketplace, a desperate mother can sell her children. Unscrupulous businessmen can sell contaminated animal feed, infected animals, or infected meat products (the recent spread of mad cow disease and foot-and-mouth disease in Europe has successfully destabilized Europe’s agricultural infrastructure). Clever brokers, at otherwise meritorious institutions, can manipulate stock prices. A media giant can peddle a writer’s work on the Internet for money without compensating the writer. A software monopolist can disable operating system features to destabilize his competitors, etc.

But legislation, like the laws of physics, has its own supralaws -- laws that govern laws. The primal supralaw of legislation is what perpetuates the Darwinistic net advantages of lordship over bondage. Thus, laws favor: the state over citizens; big corporations over small firms; lenders over borrowers, franchisers over franchisees; landlords over tenants; producers over consumers; HMOs over patients; employers over employees, etc.24

The corroborating evidence of bias in the legislation and in the judicial system is overwhelming. In a study of outcomes of litigation in the United States, covering the period from 1870 through 1970, Stanton Wheeler et al. found that the net advantage of landlords over tenants was +19.2%, and of creditors over debtors, +9.4%.25 The authors also found that the net advantage of big business was +6.4% and that of business proprietors was –5.4%.26 

The situation in Canada was much worse. According to Peter McCormick, the net litigation advantage of big business (banks, insurance companies, and major corporations) was +21.1%; of small and midsized enterprises, -4.8%; and of individuals, -7.2%.27

It is not surprising that the probability of ruin of small firms in North America should be so great.

Defense Measures for Entrepreneurs

Justice (fairness) requires that people have "approximately equal power."28 Today, the chasm in the powers and advantages of transnationals and small firms – and of universal banks and entrepreneurs -- is beyond the comprehension of most people.

There is a monstrous asymmetry in the advantages, powers, and jurisdictions of firms. The distribution of power in the marketplace is flagrantly biased – it favors the rich and powerful, it favors lenders over borrowers.

Large corporations lobby and buy access to legislators. They benefit from quantity discounts, economies of scale, tax credits, tax cuts, political favors, government subsidies, media coverage, negative option billing rights, police protection, litigation advantages, etc. Small corporations get the crumbs.

So what can you as entrepreneur do? Here are a few suggestions:

  1. Become self-sufficient and autonomous – develop an aversion to debt.
  2. Review the law, including the following Acts: The Truth in Lending Act; The Equal Credit Opportunity Act; The Fair Credit Reporting Act; The Fair Credit Billing Act; The Fair Debt Collection Practices Act; The Consumer Leasing Act; The Credit Repair Organizations Act; The Gramm-Leach-Bliley Act; and The Home Ownership and Equity Protection Act.
  3. Become familiar with litigation – its techniques, costs, duration, and most likely outcomes.
  4. Review the business news headlines for the last recession (use the Internet or visit your local library). Know and understand the history of the business cycle – discover its tricks, illusions, superstitions, and deceit. Know when, how, and why bankers are likely to freeze, reduce, or call operating loans. Then prepare for the coming recession.

  5. Understand the practices and procedures of the marketplace. Minimize your risks. Before signing any agreement, know what can lurk around your corner.

  6. Organize with like-minded people a political movement to eliminate the net advantages of lenders over borrowers in the constitution and in the law.

  7. Most important, prepare a self-defense strategy and a plan for safeguarding the economic safety, security, and survival of you family.

To sum, become vigilant, informed, inventive, and fearless. Have a self-defense plan and a self-defense fund. Protect your economic interests with political action -- and with shrewd measures, countermeasures, and counter-countermeasures for combating the "strangers." Otherwise, they will eat your riches and wealth and defile your honor.


1 See Eugnostos The Blessed (III,3 and V,1) and The Sophia of Jesus Christ (III,4 and BG 8502,3). Introduced and translated by Douglas M. Parrott. In The Nag Hammadi Library. James M. Robinson, general editor. 3rd ed., pp. 224 and 226.

2 The Gospel of Thomas. Introduced by Helmut Koester. Translated by Thomas O. Lambdin. Saying no. 63. In The Nag Hammadi Library. James M. Robinson, general editor. 3rd ed., p. 133.

3 Ecclesiastes 9:11.

4 Ecclesiastes 2:11 and 2:20.

5 Ecclesiastes 6:1-2.

6 Aristotle. The Ethics of Aristotle: The Nicomachean Ethics. Translated by J.A.K. Thomson, 1953. Revised with Notes and Appendices by Hugh Tredennick, 1976. Introduction and Bibliography by Jonathan Barnes, 1976. London, England: Penguin Books Ltd. Book IV: Other Moral Virtues, at 148.

7 Adam Smith, The Wealth of Nations (1776), edited by Edwin Cannan, with a Preface by George J. Stigler, 1976. Vol. 1, p. 56.

8 Ibid., Vol. 2, at 161.

9 Ibid., Vol. 2, at 165.

10 Ibid., Vol. 1, at 107.

11 Joseph A. Schumpeter. Capitalism, Socialism and Democracy. 3rd ed. Introduction by Tom Bottomore. Joseph A. Schumpeter, 1942, 1947. Harper & Row, Publishers, Inc., 1950. George Allen & Unwin (Publishers) Ltd., 1976. New York, NY: Harper & Row, Publishers, Inc. (Originally pub. by Harper & Brothers.) See Crumbling Walls, pp. 131-142.

12 For a comprehensive analysis of the business cycle and corroborating empirical evidence, see World War III Against The Money Trust? Toronto, ON: Macroknow, Inc., 1998. See also Edward E. Ayoub, The Boom/Bust Cycle: Why Thin Cows Eat Up Fat Cows. mindhat MAGAZINE, December 15, 1999. Toronto, ON: Macroknow, Inc.

13 Edward E. Ayoub. Bank-Induced Risks. Toronto, ON: Macroknow, Inc., 1998.

14 The notion of "creative destruction" in Capitalism is due to Schumpeter. See Joseph A. Schumpeter, op. cit., pp. 81-86 (The Process of Creative Destruction).

15 Arthur J. Alexander. Managing Financial Distress in Japan’s Business World. Japan Economic Institute Report, 25, July 2, 1999, http://www.jei.org/Archive/JEIR99/9925f.html. (Business Failures in Japan by Statute and Process, 1980-98; cited sources: Teikoku Databank, Ltd. and Federation of Bankers’ Associations of Japan, for "suspension of bank credit.")

16 Makoto Ito and Takao Tanase. Kigyo Tosan no Hori Unyo. Cited in Frank Packer and Marc Ryser, The Governance of Failure: An Anatomy of Corporate Bankruptcy in Japan (Working Paper No. 62), New York, NY: Columbia University, Center on Japanese Economy and Business, April, 1992, p.25. Cited in Alexander, op. cit.

17 Joseph A. Schumpeter op. cit., pp. 87-106 (Monopolistic Practices). See, especially, the footnote at p. 94.

18 Economic Report of the President, February 2000. Washington, DC: U.S. Government Printing Office. Table B-94. Business Formation and Business Failures, 1955-98. Cited sources: Department of Commerce (Bureau of Economic Analysis) and the Dun & Bradstreet Corporation.

19 See U.S. Bankruptcy Filings, 1980-2000, ABI World. Alexandria, VA: American Bankruptcy Institute, 2001, http://www.abiworld.org/stats/newstatsfront.html.

20 Bankruptcy Statistics for Consumer and Business. Industry Canada. Office of the Superintendent of Bankruptcy Canada. See http://strategis.ic.gc.ca/SSG/br01011e.html and http://strategis.ic.gc.ca/cgi-bin/sc_mrksv/bankruptcy/statistics/new_bank_s#THETOP.

21 In The Gay Science, Nietzsche wrote: "We cannot see around our own corner." See Martin Heidegger, Nietzsche, Volume II: The Eternal Recurrence of the Same, translated, with Notes and an Analysis by David Farrell Krell, pp. 115-120, especially p. 117 (The Character of "Proof" for the Doctrine of Return).

22 Friedrich Nietzsche. Thus Spoke Zarathustra (1892). Translated with an Introduction by R.J. Hollingdale, 1961 and 1969. London, England: Penguin Books Ltd., pp. 78-81.

23 For Hegel's philosophy of lordship and bondage, see G.W.F. Hegel, Phenomenology of Spirit, 1977, pp. 111-119 (Independence and Dependence of Self-Consciousness: Lordship and Bondage), and pp. 342-343 (man as a "Thing"; being-in-and-for-self and being-for-another).

24 See Howard Zinn. A People's History of the United States, 1492-Present. Howard Zinn, 1980, 1995. New York, NY, HarperCollins Publishers, Inc., 1995, p. 99.

25 S. Wheeler et al. Do the 'Haves' Come Out Ahead? Winning and Losing in State Supreme Courts, 1870-1970. Law and Society Review, 21 (3), 1987, pp. 403-445 (U.S. State Supreme Courts decisions, 1970-1970). (Table 7, p. 428.)

26 Peter McCormick. Canada's Courts. Peter McCormick, 1994. Toronto, ON: James Lorimer & Company Ltd., Publishers, 1994, p. 160. (Table 10.2: Party Capability Analysis -- Net Advantage: U.S. Courts. Figures calculated from data in S. Wheeler et al. (1987) and D.R. Songer and R.S. Sheehan (1992).)

27 Ibid., p. 157. (Table 10:1: Success Rates, by Litigant Category, Reported Provincial Appeal Court Decisions, 1920-1990.)

28 Friedrich Nietzsche. Human, All Too Human (I). Translated, with an Afterword, by Gary Handwerk. Stanford, CA: Stanford University Press, 1995. Fragment No. 92, p. 70.